Going to Work For A Hospital

Transcription

1 Going to Work For A Hospital John R. Voigt, Esq. Sherrard & Roe, PLC 424 Church Street, Suite 2000 Nashville, Tennessee (615) jvoigt@sherrardroe.com

2 The Transaction You have an active, successful 10-member cardiac practice located on the campus of a major hospital at which the members practice. The group leases its offices from several of its shareholders, who own the building in a separate partnership, and leases a CT machine, which it operates in its office under the in-office ancillary services exemption from the Stark Law. 2

3 The Transaction The group has seen its per physician income decline in recent years and the shareholders are becoming concerned for their futures. At just this point, the CEO of the hospital approaches the senior member of the group and says that the hospital would like to buy the group and employ its physicians. 3

4 What Does This Mean? The hospital will buy certain - but not all of the assets of the group: 4

5 What Does This Mean? The hospital will buy certain - but not all of the assets of the group: Tangible assets (FF&E) at an appraised fair value 5

6 What does this mean? The hospital will buy certain - but not all of the assets of the group: Tangible assets (FF&E) at an appraised fair value Medical records at an independently appraised value 6

7 What Does This Mean? The hospital will buy certain - but not all of the assets of the group: Tangible assets (FF&E) at an appraised fair value Medical records at an independently appraised value Inventory and supplies in place as of the closing date 7

8 What Does This Mean? The hospital will buy certain - but not all of the assets of the group: Tangible assets (FF&E) at an appraised fair value Medical records at an independently appraised value Inventory and supplies in place as of the closing date Your trained and assembled work force in place 8

9 What Does This Mean? The hospital will buy certain - but not all of the assets of the group: Tangible assets (FF&E) at an appraised fair value Medical records at an independently appraised value Inventory and supplies in place as of the closing date Your trained and assembled work force in place Clinical trials, etc. 9

10 What does this mean? The hospital may assume certain leases and contracts at its election: 10

11 What Does This Mean? The hospital may assume certain leases and contracts at its election: Leases and services agreements associated with the equipment it elects to keep 11

12 What Does This Mean? The hospital may assume certain leases and contracts at its election: Leases and services agreements associated with the equipment it elects to keep Likely the CT lease 12

13 What Does This Mean? The hospital may assume certain leases and contracts at its election: Leases and services agreements associated with the equipment it elects to keep Likely the CT lease If it does not buy the building from the physician owners, probably the lease for the space, but it will want to renegotiate the lease first 13

14 What does this mean? The hospital will not buy or assume: 14

15 What Does This Mean? The hospital will not buy or assume: Accounts receivable, cash on hand, bank accounts, other cash equivalents 15

16 What Does This Mean? The hospital will not buy or assume: Accounts receivable, cash on hand, bank accounts, other cash equivalents Debt, leases or service agreements unrelated to the purchased assets 16

17 What Does This Mean? The hospital will not buy or assume: Accounts receivable, cash on hand, bank accounts, other cash equivalents Debt, leases or service agreements unrelated to the purchased assets Employer obligations for such things as retirement plans, unused PTO, severance pay, taxes, etc. 17

18 What Does This Mean? After the closing, the hospital will employ some or all of the physicians in the group, typically pursuant to separate written employment agreements with each physician. 18

19 What Not To Expect From The Sale Do not expect to get rich. 19

20 What Not To Expect From The Sale Do not expect to get rich. You will typically be paid an independently determined fair value for the assets purchased due to Stark and Anti- Kickback law limitations. 20

21 What Not To Expect From The Sale Do not expect to get rich. You will typically be paid an independently determined fair value for the assets purchased due to Stark and Anti- Kickback law limitations. You and/or the group will be taxed on the proceeds Capital assets will be taxed as capital gains If the practice is a C corporation, it will pay the tax and any remainder will be dividended to its shareholder, where it will be taxed again. 21

22 What Not To Expect From The Sale Do not expect to continue to receive income from the CT machine. 22

23 What Not To Expect From The Sale Do not expect to continue to receive income from the CT machine. The group will no longer own the machine. For this reason, you and/or the group will no longer qualify under the in-office ancillary services exemption from Stark 23

24 What To Expect From The Sale Do expect to continue to collect the accounts receivable left in the group following the closing. Taxed to the group as ordinary income just as would have been if sale had not occurred. 24

25 There are three in particular: What s The Point? 25

26 There are three in particular: What s The Point? To get out of the practice management business. 26

27 There are three in particular: What s The Point? To get out of the practice management business. To prepare for the coming changes in the way health care is delivered and financed. The Medicare Sustainable Growth Rate is unlikely to rise for specialists and super-specialists Your incomes are under attack Accountable Care Organizations ( ACO ) are coming 27

28 What s The Point? There are three in particular: To get out of the practice management business. To prepare for the coming changes in the way health care is delivered and financed. The Medicare Sustainable Growth Rate is unlikely to rise for specialists and super-specialists Your incomes are under attack Accountable Care Organizations ( ACO ) are coming To attempt to stabilize your incomes in the coming era of downward pressure. 28

29 What To Look For In Your Employment Three main areas of concern: Agreement? 29

30 What To Look For In Your Employment Agreement? Three main areas of concern: Compensation and Benefits Issues. Practice and Practice Control Issues Term and Termination Issues 30

31 Compensation And Benefits Personal Compensation: How/how much will I be paid? Will it be guaranteed? If so, for how long? When will it begin? What about when I leave? What about outside activities: Writing, speaking, teaching, witness fees, inventions, research? 31

32 Benefits: Compensation And Benefits How will they compare to what I have now? Will my seniority carry over? What about my professional liability/medical malpractice insurance? Who will pay my tail going in? Who will pay my tail when I leave? 32

33 Practice And Practice Control What will I be expected to do? Where will I be expected to do it? Will I be required to work a certain number of hours per week? How much control will I have over the people I work with? Can I keep my nurse? How much say will I/we have in the running of our practice after we go to work for the hospital? 33

34 Term And Termination For how long is my employment guaranteed? For how long is my compensation guaranteed? Can I terminate the agreement before it expires? Can the hospital? On what basis? Will they owe me anything if they do? If I terminate the agreement early will there be a non-compete? non-solicitation provision? A Can I buy my practice/assets back? On what terms? 34

35 Pointers Negotiate the entire employment agreement before you commit to sell your practice. 35

36 Pointers Negotiate the entire employment agreement before you commit to sell your practice. Unlike the decision to sell your practice, your employment agreement is personal to you. Get your own lawyer and accountant to advise you Do not be afraid to negotiate items that are (uniquely) important to you Do not be afraid to walk away from the deal 36

37 Remember Once you sign the employment agreement, you will be working for them. 37

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39 Questions? 39